Part of the problem is that even though there was plenty of information in the media that housing prices were climbing at an unsustainable rate, most people chose not to believe it. Saying there was a bubble that would one day “pop” usually opened you to ridicule.

Well, fast forward 1 year later, the complex where we used to have the townhouse have multiple homes that are selling at an avg of $50k below the market price last year and are still on the market. I guess they haven’t fully digested the kool-aid intake from a few years back.

Can IR overlay what actually has happened over his chart showing the projected fall of median prices.

Bet he was overly bullish and the drops are worse.

Also, while I’m wishing, I wish that someone would redo that Case Shiller rollercoaster thing.  Previously, it stopped in about 2005, while the coaster was at the top of a superhumoungous rise, just waiting to fall.

34 HONEY LOCUST, Irvine, CA 92606
List Price: $799,999
Last Sale:  09/19/06
Sales Price:  $1,141,500
http://www.redfin.com/CA/Irvine/34-Honey-Locust-92606/home/7201195

157 CHURCH PLACE, Irvine, CA 92602
List Price: $649,900
Last Sale:  01/30/07
Sales Price:  $815,000
http://www.redfin.com/CA/Irvine/157-Church-Pl-92602/home/4793127

The second SFH is in vicinity of IPO’s condo. Hopefully he got the money in the bank. This one is by far a better deal, if there is a knife catcher out there.

He is losing his house because he bought that which he could not afford.  His down payment is meaningless to his ability to service the debt for 30 years.”

you just said afford = income.  I know what my current income is.  I have some idea of whether my job is stable or not.

But if the economy takes a dive and the company goes bust and I need to find a new job… suddenly, I overpaid?

Or are you saying that I should’ve expected to be laid off and that I wouldn’t have my income to depend on to service that 30-year fix?

From what I can tell, most people don’t have more than 3 months salary in savings.

So maybe your algorithm above should include a
SAVINGS = 12_TMIES_MONTHLY_INCOME in addition.

just wondering

In a nation that runs up credit card debt at a personal and national level without the blink of an eye, I object to it being called ‘common’. :D

if anything, those with the sense to not go into debt are the ones losing out on some great deals here.  well, sense and morals, I guess.

Do you do webwork?  We have a little xmas gizmo that needs a website.

If average income reported for Irvine is around $150k, then the average person should be able to afford (without overpaying) a $600k loan.

Throw in 20% down and it means the average home price should be $750k.

Obviously, that $750k will get you a vastly different amount of ‘house’ depending on where you live.

So those of us who were ‘responsible’ as movingaround put it, and are within the 4*Income… we’re just, stuck, I guess, as we basically lost our equity for no fault of ours other than having a life-event need to buy a house.

Joe
<a >Austin Realtor</a> | <a >Austin Real Estate</a> | <a >Austin Real Estate Blog</a>

Joe

Now I know very well that there were people who just stuck thier head in the sand.  But I also know there were many people - myself included - who just could not figure out what the heck was going on - and I happen to be higher educated than the majority of people and more internet savvy than the majority of people and I still had a hard time.

I am not for a bailout at all - I am just for making the ‘experts’ which are the banks and ANYONE who bought thier stock take a fall just like the homeowners who have to take a fall.

For example, the “pro-SUV” tax break was intended for big vehicles used by small business, but since only the weight of the equipment was spelled out, some people figured out a Hummer (and others) could qualify for this (which is clearly not the intent of the law.

The loophole SUV loophole was closed in 2004.
See http://en.wikipedia.org/wiki/Section_179_depreciation_deduction

Likewise, the mortgage tax deduction was created as an incentive to get people to buy houses, yes, but the rationale at the time was for the betterment of the population (building equity rather than millions of Americans renting).

Like all incentives, citizens have abused this, by using an interest-only mortgage and/or buying a second home just to take advantage of the deduction.

That really is the problem. The bubble simply would not have inflated if banks had remained responsible with their lending practices. Or more specifically, if the investors had been more careful about what they were putting their money into. The irrational beliefs and attitudes of the general populace does not become a big problem unless it is enabled by lenders. Fortunately, it is the lenders who are losing the most money this time. Perhaps they will be more cautious in the future—at least for a while…

This does not make sense.  He is not losing his house because the bubble burst.  The bursting bubble did not unleash an army of house stealing ghouls.

He is losing his house because he bought that which he could not afford.  His down payment is meaningless to his ability to service the debt for 30 years.

He is losing his house because he figured housing pretty much always appreciates so it was a good gamble even though the payments were going to get tough later on.

For those that are long on *compounding interest*, well, you all know how Uncle Sam treats that so that the fools will continue believing in the concept of *buy and hold* stocks (and that includes stock mutual funds).

Good luck trying to becoming a millionaire doing that with just $80k/yr gross income.

Sincerely,

A happy millionaire that’s currently renting

Did you notice that the Great Wall Of Irvine house is now listed for 55K less than when it was profiled here at the end of June.

50K haircut in a few weeks.

Ouch!

I don’t buy this whole consumer beware attitude - we are responsible for educating our populace and if the only education we choose to give is ‘consumer beware’ then we are only hurting ourselves.

The person who bought what he could afford but will now lose his down payment because the bubble burst (and he has to sell, for whatever reason) gets some sympathy from me.

Just because you say “No ifs ands or buts” don’t make it necessarily so. Life has gray areas. That seems, to me, easy and intuitive to understand.

http://www.redfin.com/CA/Lake-Forest/19661-Torres-Way-92679/home/4807265

Yet another example of Lender Foolishness - bought in 2005 at the peak for $1.1M financed with a $850K first and a $200K second. 

Up for sale at $750K ($214 sqft will kill neighborhood comps)

http://www.rgemonitor.com/roubini-monitor/253033/american-un-beauty-the-crisis-of-the-suburbian-macmansions-and-gas-guzzling-suvs-way-of-life

You do not need an economics degree to figure out you can not afford to pay $500k fo a home if you earn $70k and have a few credit cards, non working spouseand a kid or more. Common sense tells you that. How can you not know you can not afford to pay $4000 a month in housing expenses when you only bring home $5000?

GM and Ford, wasn’t it? Their lobbyists were behind it.

“Help Farmers” is just the selling point.

How many new pickups are used on working farms? Out of all the light trucks (pickups and SUVs) Detroit was selling?

I don’t feel sorry for anyone who lost money by buying an overpriced home.  They took a risk and it didn’t pay off.  I also don’t put them down for it.  Those who take no risks lead a boring life.

There were plenty of people saying homes were overpriced, even as far back as 2002, so don’t blame the media or the car salesmen either.  There is way too much whining and complaining about people who made money when the market was good.

owners get 2 breaks, a mortgage tax break + plus a tax break when they sell.

And newspapers need to keep their advertisers happy. Craigslist already shot the legs out from under them, and the disappearance of fat lavish realwhore ads is a gunshot to their vital organs.

If you saw the signal failure of the media to question the dotcom frenzy, their behavior during the housing frenzy was no surprise.

http://www.irvinehousingblog.com/blog/comments/more-heloc-abuse/

<a >great wall of irvine</a>

The media isn’t responsible for teaching you personal finance, and neither are realtors and banks. If you didn’t learn it in school, its your own responsibility to learn what you can afford and what you can’t afford. Sure you can technically overpay according to some paper napkin estimate of home prices 3 years after the purchase price, but if you purchased without considering your ability to pay, then you are destined to get kicked out of your home by the county sherrif sooner or later...that is unless you built <a >the Great Wall of Irvine</a> (see my post).

I thought it was just common sense not to trust these people - just like we do not trust car salesmen.

Wow.  We are a gullible society aren’t we.

I don’t think knowing what a house is “worth” is as important as knowing what “you can afford”.

If everyone “knew what they could afford” then the housing market prices would fall in line.

Isn’t that MY money already??!  Thanks for “letting” me keep more of MY money.

The down payment is comepletely irrelevent to affordability.  The down payment is nothing more than a pledge that you will honor the terms of the loan.

If you put down 100K on a 1 million dollar house when your income is only 100K per year - you are an irresponsible buyer.  No ifs ands or buts.  It is extremely easy and intuitive to understand (so I thought).

I hated how realtards and brokers always spinned the concept of “tax breaks” as extra cash in your pocket. 

Wait, isn’t that money already? When did “getting a tax break” turn into a gift?